12th Sep 2005 07:00
Associated British Foods PLC12 September 2005 12 September 2005 Associated British Foods plc Pre Close Period Trading Update Associated British Foods plc issues the following update prior to entering itsclose period for its full year results to 17 September 2005, which are scheduledto be announced on 8 November 2005. At the time of the announcement of the interim financial results in April, theChairman stated that he expected to be able to report good progress in operatingprofit for the full year. Our businesses in aggregate have performed well inthe second half of the year and we expect, in line with our previous estimates,operating profit growth to be almost as strong as that achieved in the firsthalf. Primark traded very strongly in the second half of the year and like-for-likesales growth is expected to be around 12% for this period bringing the full yeargrowth to 9%. New stores were opened in Kingston, Leeds and a larger store inMullingar, replacing the existing one. The total number of stores is now 123with 2.5 million sq ft of retail selling space. The store opening programme forthe first half of the new financial year will add over 0.3 million sq ft andincludes most of the stores acquired from Allders. Primark has completed its evaluation of the Littlewoods store portfolio and nowexpects to trade from some 1.15m sq ft of retail selling space compared to 0.8msq ft previously announced. The Primark stores are planned to openprogressively from spring 2006 until early 2007 with a total investment of some£500m, higher than the £375m previously announced, reflecting the larger numberof stores being retained. The operating profit return is expected to exceed theABF pre-tax cost of capital in the first full year of trading. As a resultcapital expenditure and interest expense will be higher than expected in the2005/6 financial year. The total investment includes the acquisition cost ofthe Littlewoods stores, the net cost of trading out and closure of theLittlewoods business, the refurbishment and fitting out costs for Primark lessproceeds from the disposal of those stores not required. We will provide forthe full business closure costs, estimated at £47m, in this year's accounts as anon-operating exceptional item and so will exclude this from the calculation ofadjusted earnings per share. Trading in Littlewoods since acquisition has beenin line with expectation and there has been a high degree of interest in thosestores which will be sold. In Grocery, ACH continued to perform well in its existing businesses and tradingwas in line with expectation in the newly acquired herbs and spices and consumeryeast businesses, both of which have now been fully integrated. Twinings andOvaltine have achieved strong sales growth and benefited from a number ofmarketing initiatives. However, bakery profitability in Australia has beenfurther affected by both competitor pressure in the bread market and by thestart up costs at the new Sydney bakery. In the UK, although Kingsmill volumesincreased, Allied Bakeries was affected by lower than expected pricing andvolumes. At British Sugar, as expected, the profit in the UK has been affected by theoversupply of sugar in the EU this year and higher energy costs. However,profit benefited from firmer prices in China and better operational performancein both Poland and China. The European Commission published its proposals forthe reform of the EU sugar regime in June and our best estimate is that theseproposals will reduce operating profit from our sugar operations by some £10m in2006/7 and some £40m per annum thereafter. These proposals are now subject toEU working party consideration with a target of confirmation of their final formin mid November. At AB Mauri, yeast pricing remained weak in North America and Turkey. EasternAsia performed strongly, particularly in China, and in India, we are reducingour cost base and market conditions have improved markedly. Expenditure on acquisitions in the financial year is expected to be over £1.1bnand mainly comprises the international yeast and bakery ingredients businessfrom Burns Philp and the Littlewoods stores. Net investment income will be lower than last year as a consequence of theacquisition of the yeast business at the beginning of the financial year. Afurther reduction is expected next year reflecting the cash spent on theacquisition of the Littlewoods stores and, if interest rates remain at currentlevels, higher interest expense on our US dollar borrowings and lower investmentincome on our sterling cash funds. The accounts for the year ending 17 September 2005 will be prepared under UKGAAP and a restatement of these results under International Financial ReportingStandards will be published in December. For further enquiries please contact: Associated British FoodsJohn Bason, Finance Director Tel: 020 7399 6500 Citigate Dewe RogersonJonathan Clare, Chris Barrie, Sara Batchelor Tel: 020 7638 9571 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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